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Download Persaingan Monopolistik versus Persaingan Sempurna
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Persaingan Monopolistik versus Persaingan Sempurna Monopolistic Competition • Characteristics 1. Many firms 2. Free entry and exit 3. Differentiated product • • The amount of monopoly power depends on the degree of differentiation. Examples of this very common market structure include: • • • Toothpaste Soap Cold remedies A Monopolistically Competitive Firm in the Short and Long Run $/Q Short Run $/Q MC Long Run MC AC AC PSR PLR DSR DLR MRSR QSR Quantity MRLR QLR Quantity A Monopolistically Competitive Firm in the Short and Long Run • Short-run – Downward sloping demand – differentiated product – Demand is relatively elastic – good substitutes – MR < P – Profits are maximized when MR = MC – This firm is making economic profits A Monopolistically Competitive Firm in the Short and Long Run • Long-run – Profits will attract new firms to the industry (no barriers to entry) – The old firm’s demand will decrease to DLR – Firm’s output and price will fall – Industry output will rise – No economic profit (P = AC) – P > MC some monopoly power Monopolistically and Perfectly Competitive Equilibrium (LR) $/Q Monopolistic Competition Perfect Competition $/Q MC Deadweight loss AC MC AC P PC D = MR DLR MRLR QC Quantity QMC Quantity Monopolistic Competition & Economic Efficiency • The monopoly power yields a higher price than perfect competition. If price was lowered to the point where MC = D, consumer surplus would increase by the yellow triangle – deadweight loss. • With no economic profits in the long run, the firm is still not producing at minimum AC and excess capacity exists. Monopolistic Competition and Economic Efficiency • Firm faces downward sloping demand so zero profit point is to the left of minimum average cost • Excess capacity is inefficient because average cost would be lower with fewer firms – Inefficiencies would make consumers worse off Monopolistic Competition • If inefficiency bad for consumers, should monopolistic competition be regulated? – Market power relatively small. Usually enough firms to compete with enough substitutability between firms – deadweight loss small – Inefficiency is balance by benefit of increased product diversity – may easily outweigh deadweight loss
